The euro has overtaken the dollar as the most widely used foreign currency in Britain, according to a new report from the Bank of England.

But the Bank insisted that use of the European currency remained patchy, playing down fears of "euro-creep", or introduction of the euro by stealth.

Last year, 60% of British firms had predicted that the proportion of sales and purchases invoiced in euros would increase.

In fact, only 45% of firms reported that this had happened, the Bank said.

At the same time, use of euros in retail transactions remains restricted to a handful of stores in tourist areas, and even there accounts for an infinitesimal proportion of turnover.

Banking on the euro

Use of the euro is now widespread among company bank accounts, where it has overtaken the dollar as the most popular foreign currency.

At the end of March, the Bank found there were over 145,000 euro accounts, of which around 90,000 were held by firms.

And the European currency is widespread in border regions - especially Northern Ireland, the only part of the UK that abuts directly onto the eurozone.

But the Bank insisted that the use of euros in Northern Ireland was no higher than the previous use of Irish punts, indicating that the introduction of the single currency had not encouraged consumers to change their habits significantly.

Smooth running

Less cheering for the eurosceptics, however, was the Bank's verdict on the changeover to cash euros at the beginning of this year.

The launch, the Bank said, was a huge success and one that Britain would learn from should
it decide to join.

Opponents of the currency had been hoping for logistical chaos at the turn of the year, to increase public opposition to the loss of the pound.

But the Bank concluded that the current timetable for euro entry - still something of a mystery - could not be speeded up without running risks.

Popular opinion remains unconvinced over the euro, something the government hopes may change after many Britons handle the currency for the first time on holiday this summer.